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Abstract

The report examines a time series of pension annuity rates in the UK for 1994- 2007. It computes the money's worth of annuities, and finds that, on average, the money's worth over the sample period for 65-year old males has been 90 per cent, and for 65-year old females has been a similar, but slightly larger, 91 per cent. Taking into account load factors associated with annuity contracts and in comparison with other financial and insurance products, this implies that annuities are fairly priced.

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Research carried out by the Department of Economics, University of Bristol and XFi Centre for Finance and Investment, University of Exeter on behalf of the Department for Work and Pensions.